BSE Sensex:19,471 Sector: Media Initiating Coverage Initiating Coverage FY13E EPS,valuingthecompanyat1xPEG(FY10-FY13E). recommendation andatargetpriceofRs515basedon 21.7xP/E to at 18xFY13EEPS.Weinitiatecoverageonthestock with aBUY attract premiumvaluationvis-à-vispeers. At CMP, thestocktrades highest marginsintheindustry, we believeSunTVwillcontinueto With strongbusinessgrowth,modelwithlowestriskand VALUATIONSRECOMMENDATION AND remain strongat31%and46%overFY12EFY13Erespectively. FY12E andFY13E.Webelievethecompany'sROEROCEwill subscription revenue.WeseeOPMat76%andNPM38%for FY13E, owingtogrowthof19%inadrevenueand27% We expectSunTV'srevenuetodeliver19%CAGRduringFY10- Robust financialgrowth model ensuresrobustmarginsandlowersbusinessrisks. cost withoutcompromisingonqualityofthecontent.Thissuccessful to contentproviders,ensuringrevenueandprotectingrising it’s minimum.Itsellsprimetimeadinventoryforanupfrontcharge Sun TV’suniqueslotsalemodelhashelpedittokeepcontentcostat Unique businessmodelensuresstrongmarginsandlowrisks We expectsubscriptiontoregister27%CAGRoverFY10-FY13E. and fallinsubscriptionrevenueleakageswillenhancecablerevenue. factors wouldfurtherassistinexpandingtheDTHsubscriberbase led bystrongthrustfromtheDTHsegment.Favorablemarketpull Subscription revenuesawahealthy27%CAGRoverFY07-FY10 to increasedlevelofdigitizationinDTHanddigitalcablesegments. We believesubscriptionrevenueshouldgrowatarobustpacedue Digitization toboostsubscriptionrevenue TV willmaintainitsleadingpositionandgrowthmomentum. national andlocaladvertisersunderpinsourbeliefthatSun position ofpremiumpricingpoweranda‘must’platformfor growth (Tamil, Telugu, Kannada&Malayalam).Its competitive revenue witnessed30%CAGRoverFY07-FY10v/s20%industry rate. IntheRs27bnSouthIndianTVadmarket,SunTV's South India,outpacedIndianTVadindustrygrowth Sun TV, theleaderinIndia'slargestentertainment market- Make hay, theSunisshiningbright… VSls()1. 1282776.5 7.7 8.2 20.3 11.2 1.0 28.3 76.5 15.8 18.5 23.4 48.5 76.4 Ev/EBDITA (x) 4.5 EV/Sales (x) 9.3 41.2 78.9 PER (x) ROE (%) 36.5 12.7 ROCE (%) 75.1 Dil. EPS(Rs) 39.8 70.9 14,528 YoY Gr. (%) 19.5 Adj. NetProfit 10,394 Op. Margin(%) Op. Profit YoY Gr. (%) Net Sales KEY RATIOS KEY FINANCIALS PINC Research reportsare also availableonReuters, Thomson PublishersandBloomberg ,8 ,9 ,2 ,9 9,380 7,798 18,785 7,720 15,828 5,199 15,647 3,683 10,909 7,368 Y9F1 Y1 Y2 FY13E FY12E FY11E FY10 FY09 221. 041. 8.5 17.8 10.1 46.2 21.4 10.4 45.2 21.6 14.9 51.1 32.1 22.2 41.5 45.3 34.1 321. 9823.8 19.8 19.6 13.2 Sun TVNetworkLtd. 9852,1 24,553 20,713 19,825 553. 31.0 30.3 35.5 Rs mn boue(3.7) Relative Absolute 23% Rs556.5/370.6 Reuters Code Bloomberg Code 52 weekHigh/Low Rs 50.1 394 mn. V TradedAvg Free Float Eq SharesO/S(F.V. Rs5) Book Value pershare Market Cap STOCK DATA PERFORMANCE (%) [email protected] Sakshee Chhabra+91-22-66186633 [email protected] Namrata Sharma+91-22-66186412 RELATIVE PERFORMANCE TOP SHAREHOLDERS evmSli2.0 2.2 2.9 % 1.8 Shanmugamsundaram Selvam Selvam Selvi Bharathi Kovelamudi A Indira Anand Name 100 240 380 520 660 p-0Jl1 c-0Jn1 Apr-11 Jan-11 Oct-10 Jul-10 Apr-10 PINV
Investment rationale Dominance in the South Indian Ad Market
Sun TV one of the biggest broadcasters, has a dominant presence in the largest entertainment market – South India. Sun TV outpaced the South Indian Industry growth rate. Over FY07-FY10, Sun TV’s ad revenue augmented 30% CAGR, whereas the Rs27bn South Indian (Tamil, Telugu, Malayalam and Kannada) ad market has been growing at 20%. Sun TV’s competitive position in terms of premium pricing power and a strong platform it offers the national and local advertisers underpins our belief that the company will maintain its leading position and growth momentum.
Exhibit 1- South India Advertisement Market Share South India
Tamil Telugu Kannada Malayalam Total South
Ad Market size CY09 (Rs bn) 9 7 3 3.5 22.5
Ad Market size CY10 (Rs bn) 10 7 5 5 27 Sun TV’s ad market share is YoY growth (%) 11% 0% 67% 43% 20% 35% of the total South No. of Channels (approx.) 38 36 21 25 120 Indian 27bn TV ad market... Sun TV Channels 6 6 6 2 20
Viewer ship share of top 3 players 88% 78% 77% 94%
Viewer ship share of Sun TV channels 70% 40% 42% 34%
Source: Company, FICCI-KPMG 2011, PINC Research
We believe the regional TV ad market growth will outpace the national TV ad market as the potential of growth in consumption of various products is greater in regional markets. Thus, Sun TV being the number one broadcaster in the most attractive key markets of South India – Tamil Nadu, Andhra Pradesh, Kerala and Karnataka, will benefit the most. Moreover its pole position in majority of the south markets makes it vital for any advertiser. With a strong lead in Southern markets, we see the company sustain its current ad growth traction. We estimate 19% CAGR over FY10-FY13E under the current economic scenario.
Exhibit 2- Strong Ad revenue growth posted Ad rev enue (LHS) Grow th (YoY) 2800 80%
2100 60%
1400 40% Rs mn Rs
700 20%
0 0% Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Source: Company, PINC Research
[email protected] 2 RESEARCH Sun TV Network Ltd.
Exhibit 3- Double digit Ad Revenue growth expected going forward...
Ad rev enue (LHS) Growth (YoY) 16000 40%
12000 30%
8000 20% Rs mn Rs
4000 10%
0 0% FY08 FY09 FY10 FY11E FY12E FY13E
Source: Company, PINC Research
Digitization to boost subscription revenue
We believe subscription revenue should grow at a robust pace due to increased level of digitization in the DTH and digital cable segments. Subscription revenue observed a stolid 27% CAGR over FY07-FY10 led by strong thrust from the DTH (73% YoY 9MFY11) and cable segment (43% YoY 9MFY11). Favorable market pull factors would further assist in expanding the DTH subscriber base and fall in subscription revenue leakages. We expect subscription growth to stay high at 27% CAGR over FY10-FY13E.
Exhibit 4- Quarterly Subscription Revenue trend
Total Subscription rev enue (LHS) Grow th (YoY) 1400 80%
1200 60%
1000 40%
Rs mn 800 20%
600 0%
400 -20% Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Source: Company, PINC Research
[email protected] 3 RESEARCH Sun TV Network Ltd.
Exhibit 5- Robust Subscription Revenue growth expected...
Total Subscription rev enue Grow th (YoY) 8000 75%
Subscription revenue registered a 27% CAGR 6000 55% over FY07-FY10... 4000 35% Rs mn
2000 15%
0 -5% FY08 FY09 FY10 FY11E FY12E FY13E
Source: Company, PINC Research
DTH revenue: An immense opportunity…
Sun TV being one of the largest Indian broadcasters has benefited from increasing penetration of digital distribution. Moreover, its favorable position in South India provides it an additional Subscriber base increased from 1.1mn in FY08 to advantage. More than 60% of its DTH revenue is from Sun Direct (a promoter group company), current base of 6.7mn a major player in the South Indian market. Its subscriber base has grown from 1.1mn in FY08 subscribers... to 6.7mn in Q3FY11, a whopping increase of more than 5x in a 30.6mn subscriber market. Given the tremendous opportunity of further penetration of DTH services in the current markets of Sun TV, we expect this segment to grow at 32% CAGR during FY10-13E and contribute 18% to the overall top line in FY13E. Cable Revenue: To grow further…
The company has delivered moderately strong cable revenue growth despite under-reporting of subscribers’ base and subscription revenue leakages (43% YoY growth during 9MFY11). We believe tough competition from DTH operators would help in checking subscription revenue leakages and enable the company to sustain its growth rate. We expect this segment to deliver 21% CAGR over FY10-FY13E.
Exhibit 6- Sustainable Cable Revenues vs Dynamic DTH Revenues
1600 DTH rev enue Cable revenue
1200
800 Rs mn Rs
400
0 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Source: Company, PINC Research [email protected] 4 RESEARCH Sun TV Network Ltd.
Exhibit 7- Strong growth ahead for both DTH and Cable
DTH rev enue Cable rev enue 5000
4100
3200
Rs mn 2300
1400
500 FY08 FY10 FY11E FY12E FY13E
Source: Company, PINC Research
International Subscription: Expanding presence outside India..
Sun TV already has presence in countries like Malaysia, Singapore, Canada, Sri Lanka, the UK, South Africa, Australia, Europe and the US. Further penetration into new markets and steady growth in current markets would augment its international subscription revenue. Unique business model ensures strong margins and low risks
Its unique slot-sale model has helped it keep content cost at the minimum. The prime time ad inventory is sold at an upfront charge to content providers ensuring revenue and protecting the rising content cost without compromising the quality of the content. The remaining ad slots are monetized by the company through its strong position in the market. This successful model ensures robust margins and lowers business risks. Sun TV holds the right to shift the content to a non-prime band if the content does not perform in keeping with expectations and terminate the contract if the program is unsuccessful. The discarded content/program cannot be telecast on any other channel for at least two years after rejection. Hike in ad rates and broadcast fee
Sun TV increased its ad rates effective from FY12 for its flagship channel Sun TV and other Tamil channels from 8% to 32%, for its flagship Telugu channels Gemini TV of 6-13% and other Telugu channels at 9-43%, for Malayalam and Kannada channels ranging from 6% to 33% and 5-13% respectively. Broadcasting fee for different channels charged from content producers will be increased in line with the ad rate hike for the respective channels.
[email protected] 5 RESEARCH Sun TV Network Ltd.
Robust financials growth
We expect Sun TV’s revenue to post 19% CAGR during FY10-FY13E, led by 19% growth in ad revenue, 27% in subscription revenue and 11% in broadcast fee over the same period. We see OPM at 76% and NPM at 38% for FY12E and FY13E. With strong business growth from all business verticals, we believe company’s ROE and ROCE to remain moderately strong at 31% and 46% in FY12E and FY13E respectively.
Exhibit 8- Revenue Share
Adv ertisement Radio Subscription Broadcast Fee Program licensing/ Ov ersees Movie 100%
80%
60%
40%
20%
0% FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Source: Company, PINC Research
Sun TV’s unique slot sale model helps to keep the content cost at its minimum. Sun TV writes off its broadcasting and satellite rights under depreciation, so it is ideal to compare its profitabilty with competitors at the EBIT margin level. Sun TV enjoys 55% EBIT as compared to 27% of Zee Entertainment Ltd.
Exhibit 9- Higher EBIT margin compared to its competitor
60% Sun TV's EBIT Margin
Sun TV enjoys superior 50% EBIT margins in comparison to Zee Entertainment... 40%
30% Zee Ent's EBIT Margin
20% FY07 FY08 FY09 FY10
Source: Company, PINC Research
[email protected] 6 RESEARCH Sun TV Network Ltd.
Exhibit 10- Profitability Margins OPM NPM 100%
80%
OPM and NPM to remain 60% strong at 76% and 38% respectively... 40%
20%
0% FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Source: Company, PINC Research With strong financials, healthy margins and low capex requirement, we believe that the company will maintain robust return ratios with ROE of 31% and ROCE of 46% during FY12E and FY13E.
Exhibit 11- Return Ratios ROE ROCE 70%
60%
50%
40%
30%
20% FY07 FY08 FY09 FY10 FY11E FY12E FY13E
Source: Company, PINC Research
Sun TV generates healthy cashflows every year. In FY10, cashflows were as high as Rs8bn with no major capex and low operating costs(~38% of operating cashflows) thus reducing the debt requirement.
Exhibit 12- FCF/Share (Rs)
20
15
10
5
0 FY10 FY11E FY12E FY13E
Source: Company, PINC Research [email protected] 7 RESEARCH Sun TV Network Ltd.
Valuations
We believe with leadership position in the South, potential for strong business growth ahead with the least risky business model and given the highest margins in the industry, Sun TV will maintain its dominance and attract premium valuation among peers. At CMP, the stock trades at 18x FY13E EPS. We initiate coverage on the stock with a BUY recommendation and target price of Rs515 based on P/E of 21.7x FY13E EPS and value the company at 1x PEG (FY10-FY13E).
Exhibit 13- Valuation Basis FY10 FY11E FY12E FY13E EPS (Rs) 13 19 20 24 YoY (%) 41 48 5 17 3yr CAGR (%) 21.7 Target PEG multiple (x) 1 Hence Target P/E (x) 21.7 Target Price on FY13 EPS (Rs) 515
Source: PINC Research
Key risks 1. Increased competition
South India is a lucrative market and hence has attracted many players. Zee Ltd has increased focus in the South Indian market through dedicated channels. Intensifying competition may impact popularity of the channels and lead to increase in operating expenses, content cost, and employee costs.
Competitive Scenario in South India
Eenadu Television Network
ETV Network is one of the leading satellite television networks in India running 12 regional language news and entertainment channels. ETV is the major news reporting channel group in India. Controlled by News Today Private Limited, the channels telecasts news between entertainment programs. ETV has four Hindi channels in Madhya Pradesh, Uttar Pradesh, Bihar and Rajasthan, seven regional entertainment channels in Telugu, Kannada, Bangla, Oriya, Marathi, Urdu, and Gujarati, and a 24-hour news channel in Telugu. ETV Telugu and ETV Bangla offer digital entertainment to Indians living in the US.
ETV Telugu is second in the Tamil GEC market and it maintains ~20% market share (TAM) in the region.
Star Jupiter Entertainment Television Ltd
A joint venture between Star and Jupiter Entertainment, Star Jupiter Entertainment Television Ltd. operates as a subsidiary of Star India Private Limited. The company has a major stake in Asianet Communications Limited (ACL) which currently broadcasts channels in Kannada (Suvarna), Telugu (Sitara) and Malayalam (Asianet, Asianet Plus). Vijay, the Tamil general entertainment channel is also under the joint venture now.
Asianet is the leader in the Malayalam GEC market with a dominant viewership share of 50% (TAM). Suvarna has around 23% viewership in Kannada, at second position after Udaya TV. [email protected] 8 RESEARCH Sun TV Network Ltd.
Zee Entertainment Enterprises Ltd
Zee Entertainment Enterprises Ltd. is one of the largest Indian media and entertainment companies. It is a subsidiary of the Turner Group operating more than 24 television channels and a movie production company. The company also has a strong presence in the regional language sphere with channels such as Zee Marathi, Zee Bangla, Zee Telugu, Zee Kannada, Zee Talkies. It is among the largest producers and aggregators of Hindi programming in the world with a vast library of over 80,000 hours of television content.
Zee also owns a majority stake (51%) in ETC Networks and a 95% stake in Taj Television TEN Sports. It has expanded operations abroad, offering several of its channels in the UK, US, Africa and Asia. Through its strong presence worldwide, Zee entertains over 500 million viewers across 167 countries.
Zee Telugu and Zee Kannada have 18% and 13% viewership share and rank third and fourth respectively in the genres they operate. 2. Lower-than-expected ad and subscription revenue - impact on our assumptions
A slow down in the expected growth of digitization of cable can lower the expected subscription revenues. Growth in the subscriber base is highly dependant on digitization which will bring about addressability and help in recording the actual subsciber base.
The rapid entry of new player with niche content, may hamper Sun TV’s competitive advantage and thus lower our expected advertisement revenues in the long run.
[email protected] 9 RESEARCH Sun TV Network Ltd.
Company Profile Chennai-headquartered Sun TV Network Limited is part of the SUN Network Group. It is into the business of broadcasting TV and radio channels and movies production/distribution. It reaches more than 95 mn households in India and is available in 27 countries. A leader in the South Indian market, it operates 20 TV channels in Tamil, Telugu, Kannada and Malayalam in 6 genres – General Entertainment Category (GEC) News, Music, Movies, Kids and Comedy. It also airs 44 FM radio stations along with its subsidiaries, Kal Radio and South Asia FM having the largest radio network across India. It also has a movie production/distribution division, Sun Pictures, which distributes Tamil movies. Sun TV Network Europe, another fully-owned subsidiary, broadcasts and distributes Sun TV channels in the UK and Europe. Promoter Background Promoters of Sun Group, the Maran family, hold 77% of the shareholding in Sun TV Network. They have deep presence in cable distribution segment through various group companies - Sun Direct (one of the foremost DTH players in India) and cable in Tamil Nadu market. Kalanithi Maran - The Chairman and Managing Director of Sun Network, he is the son of the Former Union Minister of commerce Murasoli Maran and the brother of India's textile minister Dayanidhi Maran. His wife is the Joint Managing Director of Sun Network.
Exhibit 14- Company Overview
Sun TV Network
TV Channels Radio Film Production
TV channels Tamil Telugu Kannada Malayalam Total Kal Radio (18 channels) GEC Sun TV Gemini TV Udaya TV Surya TV 4 Sun Pictures Movies KTV Teja TV Udya Kiran TV 4 ownership-97% Movies Music Sun Gemini Udaya TV2 3 South Asia FM Music Music (23 channels) News Sun Gemini Udaya 3 ownership-59.1% News News Varthegalu Comedy Adithya Navvulu Ushe TV 3 Under parent Kids Chutti TV Khushi TV Chintu TV 3 (3 channels) Total 6 6 6 2 20 ownership-100%
Source: Company, PINC Research
Exhibit 15- Shareholding Pattern FII 9.1%
DII 3.7%
HNI’s 9.8%
Others 0.4%
Promoters 77.0%
Source: Company, PINC Research [email protected] 10 RESEARCH Sun TV Network Ltd.
Exhibit 16- Business Model
SUN TV Network Ltd.
Revenue Cost
% of CAGR % Of Total % Of Total CAGR Cost Revenue (07-10) Revenue (07-10) (FY 10) (FY 10) (FY 10) Advertisement 54 30% Content Cost 33 8 15% Employee Expense 37 9 24% Subscription: Cable 11 27% Other Expense 29 7 24% DTH 14 Broadcasting Fee 10 7% Program License 4 17%
Market Leader ( 35% TV Presence in 27 Unique Slot sale ModelJ content production cost Ad mkt share)Jmarket countries, on continuous transferred to content provider able to absorb regular Ad expansion mode rate hikes Low content production Assurance of quality cost content always Higher fee charged to content provider compared to competitors, give 4 mins/half hr of commercial time to the content provider
High Margins (FY10) OPM-75% EBIT-55% High Return Ratios (FY10) ROE-28% ROCE-42% Premium Valuation to peers
Source: Company, PINC Research
[email protected] 11 RESEARCH Sun TV Network Ltd.
Revenue drivers TV Advertising revenue (54% of Total Revenue) The total south Indian TV advertising market is estimated at Rs27bn (KPMG 2011), of which Tamil language has the highest ad market share of ~37% (Rs10bn) followed by Telugu, Malayalam and Kannada with 26%, 18.5% and 18.5% respectively. Sun TV has ~35% market share of the total South Indian ad market. Tamil and Malayalam contribute 60% of revenue and Telugu and Kannada constitute 40% of revenue. Broadcasting revenue/slot sale revenue (9% of Total Revenue) A unique and differentiated model helps achieve robust margins by keeping content cost off the books. Here Sun TV sells most of the prime time slots on a sponsored programming model where airtime (67% of the commercial time) is sold to content producers in return for a fixed telecast fee and the remaining 33% of commercial time is retained by the company. For half hour programming, a fixed fee of Rs0.15–0.2 mn is charged to content producers and out of total 6 minutes of commercial time per half hour, 4 minutes are given to the content provider. The company retains the remaining 2 minutes of commercial time. Further, the fixed fee is received a week in advance, which prevents delay in payment and incidence of bad debtors. With the programming risk being solely with the content provider, it forces them to maintain and improve quality of content to earn higher ad rates and upside from higher TRP ratings. However, Sun TV has the right to shift the content to a non-prime band if the content does not perform as per expectations or terminate the contract if the program is unsuccessful. The discarded content/ program cannot be telecast on any other channel for at least two years after rejection.
Subscription Revenue (24% of Total Revenue) Cable (46% of Subscription Revenue) The analog cable industry is still a disorganized market with lack of transparency from the side of the LCOs. Subscriber declaration levels are only 20% of the actual subscriber base. Thus money is locked with the cable operators. Efforts are being made by the government to digitize the cable TV industry and bring in addressability. This move will benefit Sun TV and enhance its subscriber numbers and increase subscription revenue. SUN TV’s revenue from cable is expected to deliver 21% CAGR over FY10-FY13E.
DTH (54% of Subscription Revenue)
With the subscriber base crossing 6.7mn, revenue from DTH witnessed growth of 73% YoY(9MFY11). Moreover, its favorable position in south India provides it an additional advantage. More than 60% of its DTH revenue comes from Sun Direct (a promoter group company), a major player in the south Indian market. Overseas revenue/programming revenue (4% of Total Revenue) Sun TV Network is spread across North America, Canada, UK, Singapore, Malaysia, Sri Lanka, parts of South Africa and the Middle East. It has further expanded in some markets. In North America, it has expanded from DTH to acquire cable rights and grow ad revenue in partnership with Global Media Management LLC and World Media Connect LLC.
This will lead to a larger subscriber base from the current 0.5mn subscribers from U.S and augment revenues. Sun TV is also expanding into IPTV in Europe, parts of North America and Canada. We expect overseas revenue to deliver 20% CAGR over FY10-FY13E.
[email protected] 12 RESEARCH Sun TV Network Ltd.
Movies (5% of Total Revenue)
Sun TV’s movies arm, Sun Pictures, is solely into the distribution of Tamil films. Its single home production movie was Endhiran. Most movies are mid-sized and overall budget has been maintained. Radio (4% of Total Revenue) Sun TV is one of the largest in radio broadcasters in India through its subsidiaries with 44 licenses. Being in its nascent stages it contributed 4% to the over all top-line in FY10. As a revenue driver this segment is still evolving, over the past 3yrs it grew by 282% CAGR from Rs10mn in FY07 to Rs562 mn in FY10. As per management expectations Kal Radio will be PAT positive whilst South Asia FM will be EBIT positive with minimal negative PAT in FY11. Phase III licensing of radio will facilitate the company to expand its footprint further. Going forward we expect Radio segment to grow at 25% CAGR over FY10-FY13E and contribute 5% to sales in FY13E. Cost Drivers Content Cost (33% of Total Cost)
The unique slot model of Sun TV ensures that the company incurs minimal content production cost as most of the content is produced by outside producers. Further, unlike other broadcasters who have a commissioned model that entails buying content from producer, Sun TV sells the time slot on its channels to producers. This minimizes content costs tremendously. Employee Cost (37% of Total Cost)
Employee cost witnessed 24% CAGR over FY07-FY10. Directors remuneration garners the largest chunk with 55% of the total employee costs as compared to employee salaries which is 39% of the share. We expect employee cost to rise at a CAGR of 24% over FY10-FY13E.
[email protected] 13 RESEARCH Sun TV Network Ltd.
Sun TV’s Competitive Viewership Position
Tamil Market Channel Share SUN TV is the most viewed and popular channel in the Tamil GEC segment. It is the leader and trend setter for all Tamil channels. Due to its dominant market share, SUN TV commands a higher ad rate, which enhances its revenue potential. The next closest player Kalaignar TV has a mere 10.7% share. Star-owned Vijay TV, which has 7.2% share, is continuously striving to become the no. 2 player in the Tamil GEC market. GEC garners 64% share of the tamil market. Top 5 programs of Tamil GEC are from Sun TV, four in fiction and one in the movie slot.
Exhibit 17- Tamil GEC viewership share (%)
SUN TV Kalaignar Vijay TV Jaya TV Raj TV Others
80 71.9 69.4 68.8 69.0 67.7 70.0 70.8
60
40
20
0 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Source: TAM, PINC Research
Telugu Market Channel Share Gemini TV continues to retain it’s No. 1 position with increased viewership numbers in the past two quarters. Its large movie library helps attract a larger no. of viewers. Addition of non-fiction reality shows has pushed up TRPs, leading to a rise in viewership. Out of the top five Telugu GEC programs, four are of Gemini TV, three in fiction and one in the feature film slot.
Exhibit 18- Telugu GEC viewership share (%)
Gemini TV ETV Zee Telugu Maa Telugu Others 60
43.7 44.1 45 40.1 40.8 36.4 34.6 36.4
30
15
0 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Source: TAM, PINC Research [email protected] 14 RESEARCH Sun TV Network Ltd.
Kannada Market Channel Share Udaya TV has always been the top player in the Kannada GEC market. With a blend of news programs along with fiction serials, it has been the leader. A decline in viewership is seen with increased competition from Star Jupiter’s Suvarna TV, which is gaining viewership due to its addition of a dedicated Tulu slot catering to niche Tulu-speaking people. Of the top five GEC Kannada programs , four belong to Udaya TV, three in fiction and one in the movie slot. Suvarna’s reality show is also among the top five.
Exhibit 19- Kannada GEC viewership share (%) Udaya TV Suv arna ETV Zee Kannada Kasturi DD Chandana
45 42.3 41.6 39.2 40.6 39.1 37.5 38.6
30
15
0 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Source: TAM, PINC Research
Malayalam Market Channel Share Asianet continues to be the leader in Malayalam GEC but its viewership is slowly decreasing due to increased competition from Surya TV. Non-fiction shows have a high amount of viewership in the Malayalam GEC market. Asianet banks heavily on its non-fiction reality shows for viewership. Surya TV is striving hard to gain higher market share by offering more movies, news-based programs and game shows to its viewers. GEC garners 77% share of Malayalam market. Of the top five programs in Malayalam GEC, four programs comprising a combination of fiction and non-fiction shows belong to Asianet. Surya TV’s reality show is also among the top five.
Exhibit 20- Malayalam GEC viewership share (%)
Asianet Surya TV Kairali Amrita TV DD4 Malay alam 80.0
62.3 60.0 53.4 53.5 52.4 52.4 51.6 50.6
40.0 34.4 32.0 33.1 32.7 32.4 32.3 30.7
20.0
0.0 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1FY11 Q2FY11 Q3FY11
Source: TAM, PINC Research [email protected] 15 RESEARCH Sun TV Network Ltd.
Year Ended March (Figures in Rs mn)
Income Statement FY09 FY10 FY11E FY12E FY13E Cash Flow Statement FY09 FY10 FY11E FY12E FY13E Net sales 10,394 14,528 19,825 20,713 24,553 Pre-tax profit 5,693 8,000 11,343 11,743 14,134 Growth (%) 19.5 39.8 36.5 4.5 18.5 Depreciation/Amortisation 2,205 3,209 4,654 4,533 5,221 Gross profit 8,125 11,962 16,864 17,281 20,500 Total tax paid (2,017) (2,811) (3,743) (3,875) (4,664) Other operating charges 757 1,053 1,217 1,453 1,715 Chg in working capital 413 (892) (1,559) (289) (1,272) EBITDA 7,368 10,909 15,647 15,828 18,785 Other operating activities (419) (35) (168) (18) (95) Growth (%) 23.3 48.1 43.4 1.2 18.7 Cash flow from oper. (a) 5,875 7,471 10,527 12,094 13,323 Depreciation 2,205 3,209 4,654 4,533 5,221 Capital expenditure (7,085) (5,825) (3,852) (4,700) (6,000) Other income 668 350 400 500 625 Chg in investments (5,337) (4,619) (3,421) (1,000) (2,500) EBIT 5,831 8,049 11,393 11,795 14,189 Other investing activities 8,706 3,899 (1) - 50 Interest paid 138 49 50 52 55 Cash flow from inv. (b) (3,715) (6,545) (7,273) (5,700) (8,450) PBT (before E/o items) 5,693 8,000 11,343 11,743 14,134 Free cash flow (a+b) 2,160 927 3,254 6,394 4,873 Tax Provision 2,293 2,991 3,743 3,875 4,664 Equity raised/(repaid) - 1,066 - - - E/o loss / (Income) - - - - - Debt raised/(repaid) 6 (709) (1) - - Net profit 3,400 5,009 7,600 7,868 9,470 Change in Minorities Interest - - - - - Adj. net profit (Including MI) 3,683 5,199 7,720 7,798 9,380 Dividend (incl. tax) (1,844) (1,153) (3,688) (3,919) (4,149) Growth (%) 12.7 41.2 48.5 1.0 20.3 Other financing activities (312) (43) (50) (52) (55) Diluted EPS (Rs) 9 13 20 20 24 Cash flow from fin. (c) (2,150) (838) (3,740) (3,971) (4,204) Diluted EPS Growth (%) 13.1 41.0 48.7 1.0 20.3 Net chg in cash (a+b+c) 10 88 (485) 2,423 669
Balance Sheet FY09 FY10 FY11E FY12E FY13E Key Ratios FY09 FY10 FY11E FY12E FY13E Equity Share capital 1,970 1,970 1,970 1,970 1,970 OPM (%) 70.9 75.1 78.9 76.4 76.5 Reserves & surplus 10,328 12,167 16,199 20,078 25,308 Net margin (%) 33.3 34.9 38.2 36.8 37.3 Shareholders' funds 17,016 19,734 23,765 27,644 32,875 Yield (%) 0.6 1.7 1.8 1.9 2.0 Minorities interests 385 371 385 412 472 Debt/Equity (x) - - - - - Total Debt 716 1 - - - Net Working Capital (days) 233 144 126 169 172 Capital Employed 18,117 20,106 24,150 28,056 33,347 Asset turnover (x) 0.7 0.8 0.8 0.7 0.7 Net fixed assets 9,718 12,126 11,324 11,491 12,270 ROCE (%) 34.1 41.5 51.1 45.2 46.2 Net Other Current Assets 2,968 1,372 2,930 3,219 4,492 ROE (%) 23.4 28.3 35.5 30.3 31.0 Cash & Cash Eq. 3,654 4,367 3,896 6,346 7,085 EV/Net sales (x) 15.8 11.2 8.2 7.7 6.5 Investments 2,038 2,580 6,000 7,000 9,500 EV/EBITDA (x) 22.2 14.9 10.4 10.1 8.5 Net Deferred Tax Assets (261) (339) - - - PER (x) 45.3 32.1 21.6 21.4 17.8 Total assets 18,117 20,106 24,150 28,056 33,347 Price/Book (x) 10 8765
1-Year forward P/E Band Median PE v/s Daily PE Daily PE Median PE 700 40
550 28X 30 24X 21X 400 20 17X
250 13X 10
100 0 Apr-08 Dec-08 Sep-09 Jun-10 Mar-11 Apr-08 Dec-08 Sep-09 Jun-10 Mar-11
[email protected] RESEARCH
TEAM EQUITY DESK Sadanand Raje Head - Institutional Sales [email protected] 91-22-6618 6366 Technical Analyst RESEARCH Vineet Hetamasaria, CFA Head of Research, Auto, Cement [email protected] 91-22-6618 6388 Nikhil Deshpande Auto, Auto Ancillary, Cement [email protected] 91-22-6618 6339 Tasmai Anil Merchant Auto, Auto Ancillary, Cement [email protected] 91-22-6618 6377 Vinod Nair Construction, Power, Capital Goods [email protected] 91-22-6618 6379 Ankit Babel Capital Goods [email protected] 91-22-6618 6551 Hitul Gutka Power [email protected] 91-22-6618 6410 Subramaniam Yadav Construction [email protected] 91-22-6618 6371 Madhura Joshi Power [email protected] 91-22-6618 6395 Satish Mishra Fertiliser, Natural Gas, Engineering [email protected] 91-22-6618 6488 Urvashi Biyani Fertiliser, Natural Gas, Engineering [email protected] 91-22-6618 6334 Naveen Trivedi FMCG [email protected] 91-22-6618 6384 Rohit Kumar Anand IT Services [email protected] 91-22-6618 6372 Ronak Bakshi IT Services [email protected] 91-22-6618 6411 Namrata Sharma Media [email protected] 91-22-6618 6412 Sakshee Chhabra Media [email protected] 91-22-6618 6633 Bikash Bhalotia Metals, Mining [email protected] 91-22-6618 6387 Harleen Babber Metals, Mining [email protected] 91-22-6618 6389 Dipti Vijaywargi Metals, Mining dipti.vijaywargi @pinc.co.in 91-22-6618 6393 Sushant Dalmia, CFA Pharma [email protected] 91-22-6618 6462 Suman Memani Real Estate, Mid caps [email protected] 91-22-6618 6479 Abhishek Kumar Real Estate, Mid caps [email protected] 91-22-6618 6398 C Krishnamurthy Technical Analyst [email protected] 91-22-6618 6747 SALES Rajeev Gupta Equities [email protected] 91-22-6618 6486 Ankur Varman Equities [email protected] 91-22-6618 6380 Himanshu Varia Equities [email protected] 91-22-6618 6342 Shailesh Kadam Derivatives [email protected] 91-22-6618 6349 Ganesh Gokhale Derivatives [email protected] 91-22-6618 6347 DEALING Mehul Desai Head - Sales Trading [email protected] 91-22-6618 6303 Naresh Panjnani Co-Head - Sales Trading [email protected] 91-22-6618 6333 Amar Margaje [email protected] 91-22-6618 6327 Ashok Savla [email protected] 91-22-6618 6321 Sajjid Lala [email protected] 91-22-6618 6337 Raju Bhavsar [email protected] 91-22-6618 6322 Kinjal Mehta [email protected] 91-22-6618 6333 Chandani Bhatia [email protected] 91-22-6618 6324 Hasmukh D. Prajapati [email protected] 91-22-6618 6325 Kamlesh Purohit [email protected] 91-22-6618 6357 SINGAPORE DESK Amul Shah [email protected] 65-6327 0626 DIRECTORS Gaurang Gandhi [email protected] 91-22-6618 6400 Hemang Gandhi [email protected] 91-22-6618 6400 Ketan Gandhi [email protected] 91-22-6618 6400 COMPLIANCE Rakesh Bhatia Head Compliance [email protected] 91-22-6618 6400 Infinity.com Financial Securities Ltd
bright thinking SMALL WORLD, INFINITE OPPORTUNITIES
Member : Bombay Stock Exchange & National Stock Exchange of India Ltd. : Sebi Reg No: INB 010989331. Clearing No : 211 1216, Maker Chambers V, Nariman Point, Mumbai - 400 021; Tel.: 91-22-66186633/6400 Fax : 91-22-22049195
Disclaimer: This document has been prepared by the Research Desk of M/s Infinity.com Financial Securities Ltd. (PINC) and is meant for use of the recipient only and is not for public circulation. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors The information contained herein is obtained and collated from sources believed reliable and PINC has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The opinion expressed or estimates made are as per the best judgement as applicable at that point of time and PINC reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval PINC, its affiliates, their directors, employees and their dependant family members may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of PINC. The views expressed are those of analyst and the PINC may or may not subscribe to all the views expressed therein This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions Neither PINC, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Copyright in this document vests exclusively with PINC and this document is not to be reported or circulated or copied or made available to others.
Our reports are also available on Reuters, Thomson Publishers and Bloomberg PINV